FCCBs are back in vogue

FCCB's caused a lot of pain to Indian companies in the form of forex and mark to market losses during 2008 with the unexpected depreciation in the rupee. But that bad phase seems to be forgotten rather quickly with a spurt in FCCB issues by many companies once again. As per reports, in the past four days, four companies have announced plans to raise a total of about US$ 702 m through FCCBs. Infact, even the coupon rates being offered on the same have seen a fall, going from 7% to 8% earlier this year to 4% to 4.5% recently. Despite that, we doubt if this propensity of Indian companies to expose themselves to the risk of foreign exchange rate volatility by way of FCCBs can be good for investors.